Economics, Econometrics and Finance
4 years ago

Rigid oil prices lead to jumps with interest rate increases.

The North American Journal of Economics and Finance
Monetary effects on nominal oil prices
Max Gillman, Antón Nákov

Paper Summary

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The article discusses how changes in the US dollar price of oil are influenced by changes in the overall US price level and nominal interest rates. When oil prices are flexible, they move in line with the US price level, but when oil prices are fixed, they jump up when nominal interest rates go up. The study found evidence of these jumps in oil prices and showed that US inflation strongly influences oil prices, supporting the theory proposed.